Another day, another payroll number. Should we even care? It's not like the Fed will, if it's a strong number...though of course another weak one may be sign in an incipient turn in the labor market and thus further reason for caution. The outlook doesn't look particularly favourable in any event; March has been a seasonally week month over the past few years, and earnings are beset by the same downward distortion that affected them last month. Moreover, Macro Man's model (which incorrectly called a weak figure last month) is sticking to its guns and forecasting a reading of 124k, which would be the second-weakest reading in the 87-member Bloomberg panel.
The Fed will no doubt be pleased to see that China's manufacturing PMI ticked up to 50.2, its joint highest level since late 2014. It is of course too early to say with any confidence whatsoever that the worst has passed for China; after all, the same index ticked up to the same level last May-June, and that didn't exactly turn out well.
While it is true that China is suffering from an export hangover, the same is equally the case for, say, Europe and Japan, yet the Fed feels little compunction in pursing policies that allow their currencies to strengthen, thereby harming their economic outlooks.
If anyone has a beef, it's probably Japan, given that US imports from the country have gone nowhere despite the Abenomics revolution. (Actually, if anyone really has a beef it's Australia, who were rapped across the knuckles for jawboning its currency. It appears that the US Treasury is just like the regulators: picking a winnable fight is more important than picking the correct fight.)
Meanwhile, China's Q4 basic balance was in surplus and its current account was the largest since 2008. This is what happens when you have the central banks of the world's two largest economies working diligently on your behalf. (H/T @ericbeebo)
Well, at least the Fed's decision to outsource its mandate to China means that the economy will benefit from lower market rates, as Yellen claimed in her speech.
Right? Right?
While it is true that China is suffering from an export hangover, the same is equally the case for, say, Europe and Japan, yet the Fed feels little compunction in pursing policies that allow their currencies to strengthen, thereby harming their economic outlooks.
If anyone has a beef, it's probably Japan, given that US imports from the country have gone nowhere despite the Abenomics revolution. (Actually, if anyone really has a beef it's Australia, who were rapped across the knuckles for jawboning its currency. It appears that the US Treasury is just like the regulators: picking a winnable fight is more important than picking the correct fight.)
37 comments
Click here for commentspayroll is absolutly irrelevant the day after end of quarter lipgloss
Replythey pushed equities as much as they could, now gravity resumes - Nikkei bad, Eurostoxx VERY bad
If the market turns on April Fools... I gonna laugh so hard...
ReplyF##k me..Nico G is back in town..what the f##k for. I thought you'd cashed in your chips. No insult intended to our honourable Macro Man, Nico...but haven't you established by now that the underlying tone around here ...and everywhere else for that matter does violence upon the intellect! The market has paid the necessary players and will continue to do so as it has unlimited resources, and this will only draw more bees to the honeypot. Why bother.
Reply"While it is true that China is suffering from an export hangover, the same is equally the case for, say, Europe and Japan, yet the Fed feels little compunction in pursing policies that allow their currencies to strengthen, thereby harming their economic outlooks.
Reply"
I think Draghi's pivot to credit is a nod to the idea that everyone understands a rising dollar goes beyond minor collateral damage given the EM linkage. A strengthening yen, with its asset risk aversion driving tendencies is more problematic, but given a choice between a rapidly strengthening pegged yuan wreaking havoc in mainland china vs betting that corporate japan, with its globally diversified supply chain may be able to withstand a stronger yen, I'd take the latter any day.
The crux of the matter is that the US is not growing strongly enough to bootstrap up all of DM and EM like the 1998-2000 cycle, even as the dollar tries to pretend that it is and eats everyone's lunch - with that backdrop, do you blame yellen for cheating and shooting for nominal growth when she can't get the real kind.
I still think they should have bought oil futures - would have taken 10 days and $100 BN and no one would have had to go to Shanghai.
ReplyKuroda.....your ego's writing cheques your body can't cash
Goldilocks couldn't have come up with a better number herself - will be interesting to see what the 3 bears have planned for the rest of the day.
ReplyI was struck by the fact that the gain i construction more or less matched the decline in manufacturing and mining.
It's safe to continue the equity bacchanal, to gorge on low quality assets and carry trades.
Reply...Lefty, this comment of yours yesterday was pretty concise and on target. "Low quality assets" indeed. The quarter point the fed raised,as I've stated before, simply and practically means nothing when rates are at zero, so as MM states, we apparently are worried more about the globe than here at home, so it is one and done. I still wonder how at this time people are piling into high yield when this could go so horribly wrong. Not homo sapiens....homo lemmingus....
washed, no one else seems to see it.
Replyanon 1:44 curious to know what 'they' are seeing in this report that is not lukewarm (a.k.a the definition of goldilocks?)
ReplyAs nico (and in my defense, I, if you read my complete comment) pointed out there may be pressure on equities today regardless, but I certainly don't see anything in NFP that creates a legitimate excuse, especially relative to the March seasonality people were expecting - wage stuff is OK to good, participation increasing staves off inflation and the decline in manufacturing is matched by absorption in construction - what do you see that you find deflationary or inflationary?
It would be interesting if Q2 also began with a gap down like Q1... NFP may be less important than ISM today, as MM and TMM used to point out, nobody ever hikes into a sub-50 ISM, but a solid number might roil the market a bit.
ReplyCrude drifting lower again. Wonder what the narrative is going to be for the selling today? It's always amusing....
the narrative is, Europe is shit and going to hell
ReplyLOL, Nico. Dammit, Janet.
ReplyThat pig looked great last night, with all the lipstick and all, but this morning, well, it just don't look so purty.
Commodity Carnage?
ReplyDollar Stirs, Roiling Stocks?
Market Falls, Dip Buyers Take Day Off?
Equities Were Due For A Good Rinsing Anyway? (MM likes this one)
Select any one of those and there'll be applause over here at the Hammock.
[We are short GDX, XLE, USO, IWM, AUDUSD and long UUP]
jbtfd prolly salivating to get his remaining 75 back on.
ReplyNico - the follicularly challenged guy from shark tank is apparently now a stock picker and was on a CNBC panel yesterday saying how european equities are the buy of a lifetime - so I think you could be on to something there.
ReplyWashed-i agree, i don't see either inflation or deflation in the US. i see leading data mixed at the moment, but construction jobs pay enough to buy houses, cars and washing machines. and unlike oil jobs they are not geographically concentrated. BB's virtuous circle? there is a measurable shortage of single family starter homes, (demand exceeds supply) and commodities are cheap making them more profitable to build. that's what i see happening. that trend isn't macro, but there are macro implications.
Reply
ReplyGreat post!
Useful information worthy of thanks ,
http://ixgram.com
anon 2:44PM - Just cashed out all my remaining spooz. Nice couple of hundred point gain. Maybe they go higher, maybe not. Have a good w/e.
Replyjbtfd - I have to ask - did you have to express order the sell button on your keyboard to accomplish this? I was under the impression you had it permanently removed in 2014.
ReplyLB/MM/others shame on you all for turning jbtfd into a man of patience and discipline - like we needed one more of those.
@jbtfd,
ReplyCan you explain the reason of closing your long positions? Given the good data in the US today, and the price actions now, I would think the market has grind up further. What is the catalyst here?
washedup - Indeed. Glued the sell key back on specially ;) Not sure about the patience and discipline bit tho...
ReplyAnon 5:05PM - I ran out of dips to buy ;) More seriously, my model has told me to exit. There may well be higher prices ahead, and over the longer term I'd still expect to see US equities higher, but for now we are over-extended.
Fascinating, jbtfd. B in T has to occasionally glue the BUY button back on using left-over adhesive from his false teeth.
ReplyLB is always amused by the fact that in on-line broker TV commercials one only ever sees the punter hit the "BUY" button, and they are never on during a panic, of course. No, they only are on when the VIX < 15, and the punter always hits BUY, and this only after reading all the fantastic sell-side research on his iThing and/or looking at the pretty charts going from the bottom left to the upper right (Gartman style) on her iPad. A visitor from another planet might be confused by the observation that markets can and do occasionally go down, b/c it appears that nobody at all actually has a SELL button - especially not Dame Janet.
We'll see if Jbtfd is correct, I also suspect markets will be a bit lower by the end of next week. The Taxman Cometh.
wtf is going on with EU? Freaking banks and autos in the gutter. And now boring Healthcare is out of fashion as well, which EU has a lot of... meh, what a total disaster that call was.
ReplyWas looking at VIX on EuroStoxx. Interesting that it never made new lows even when QE started. Quite a different view vs US. Anyways it all about the EU banks, DB and regionals putting pressure on others, like Unicredit. have to wait till end of april to see how market reacts to Q1 earnings whereas we get US bank info in 2 weeks
ISM higher. I'm thinking this cyclical rally lasts a few more months, maybe into the fall. Industrails leading with PMI's
anon 5:05 here.
ReplyThank you jbtfd for your reply. Based on these economic numbers, the re-storing the inventory would likely to push q1 earnings higher than expected. While is no apparent risk factor on the horizon, my bet is April is likely to be a dull month. But I do not think the current peaceful market will extend into fall yet: Chinese new loan at the beginning of the year will be used up. Janet's lip service can only sustain the market for a few more weeks. Inflation is on the rise, just looking at the NFP labor earning and ISM price paid. There are going to be another crash to force CBs' hands.
Hasn't anybody noticed that global CBs (Fed, BOJ, ECB, PBOC) have to create new programs/policies in a faster speed? The interval between their policies is shorter and shorter, which probably means that their polices' impacts are smaller and smaller. Right now, it seems that only Fed can move the market to its desired direction. ECB and BOJ had somehow lost that ability.
...and the suckers are buying, as predicted,beats to the upside may well continue to grind US equities higher, and do you know what,I'm gonna join them.
ReplyGoing Long US and short Europe for the next 3 months.
Jbtfd.. welcome to the jbdnaw club. (just bloody doing nothing and waiting)
ReplyBut EM looks the buy still.
I'd wager that the Shanghai G20 didn't so much yield a tacit rates agreement but one of USD control. And not an up nor down USD agreement either. An agreememt for USD stability. So whilst long USD possies could see a stopfest the tendency will be for usd mean reversion. So USD and fx vol is going to fall further which opens up risk skew back towards carry. Untroubled usd and low usd vol is great for EM. Get confidence back in them and the leverage and demand from the asians et al picks up. And this whilst China data improves. Not a bad outlook for EM debt and recently considered toxic EM waste.
so much for us vs eu equities..what a loud of *%@@%@^%
Replyi am quite surprised with resilience in spoos given where earnings are( yes i am short and offside about 25 handles)- i expect no recession in the states but doesn't stop equities from falling off i think , for what its worth breath was quite negative for a decent up day
when was the last time dax /nky puke and spoos end up 70bps!
anyway enjoy good weekend all..definitely need one
anon 9:36
ReplyIn that case, I will bet on a rebound in dax/nky next week.
Ps..hey germ, do the world a favour, stay in Israel!
ReplyFed has become a total joke. Either they should hike or admit the data is total BS. End this "data is great, but we need to not hike" crap.
ReplyIt's completely apparent to all that the Fed is a political entity; more specifically a statist organization. Remember Bernanke was allegedly a republican but launched QE in 2012 to help obama win re-election.
Yet central planning NEVER works in the long term. Look at the USSR collapse, Greece and the EU banking system. This is the path the USA is heading toward courtesy of the Fed.
Forget the Fed. It looks like China are desperate if they have to slap tariffs on EU steel imports. A sensitive issue to say the least. What started out in 2009 with major trading economies pulling together has degenerated into a de facto currency war where none wish to bear the economic costs of a strong currency and now we may have just seen the opening shot where that currency war morphs into a trade war. I suppose a collapse in International trade might be one way of achieving global rebalancing ,but en route very disruptive one would think.
ReplyI don't usually get too excited by government posturing ,but for China to escalate such a ensitive issue smacks to me of more than just posturing. Shit looks like it's just hit the fan.
Lefty,
ReplyYou know I like having my teeth where I can see them. Just like my grandfather, in a glass by the side of the bed!
I not only removed the buy button, but it may well be lost! I will see if jbtfd will send me the one he's not using, although it probably won't get used here much either.
Gotta go now, takes a while to crank up the Model T and go to town to buy vittles.
MOOD MUSIC – “American Anger: It’s Not the Economy. It’s the Other Party,” by UCLA political scientist Lynn Vavreck in The Upshot: “[H]istorical measures indicate people are about as happy and satisfied with the economy and with their lives as they were in 1983 when Ronald Reagan told us it was ‘morning again in America.’ If that’s the case, why does it feel more like a 1 a.m. bar brawl? The answer may have more to do with political parties than economics, or at least with the interaction of the two. Today’s voters have sorted themselves and polarized into partisan groups ... Americans aren’t annoyed only by the economy; they’re also annoyed with each other.”
Replyhttp://nyti.ms/1POicCM
Anon 3:16 I beleive it has something to do with what Yanis is on to in this TED talk. Keynes and Marx in one talk, I love it!
ReplyCapitalism will eat democracy
"they’re also annoyed with each other"
ReplySo what, I'm "annoyed" with the lot of you. In fact I have no idea what you're doing on my planet. Go away. :)
FactSet: Bottom-up EPS for $SPX for Q1'16 fell 9.6%, the largest quarterly drop since Q1'09
Replyhttp://imgur.com/Rzlnt7t
Wasn't that the peak of the financial crisis?
A head spinning week...emergency room visits set to escalate...you will be driven out of your minds...there will be no place to hide
9 Fed speakers next week + Fed minutes
ReplyQuestion from the american people:
To the arsehole that represents US exceptionalism....who's the pimp on wall street that opened a joyhouse on the Westcoast through my blood ,sweat and tears and your blessing?